ResearchFarmRetail Analysts2015-07-17T07:33:08Zhttp://www.researchfarm.co.uk/?feed=atomWordPressAdminhttp://www.researchfarm.co.uk/?p=20842015-07-17T07:33:08Z2015-07-17T07:33:08ZIn a new report, MOBILE PAYMENTS 2015: Driving the uberisation of the economy, ResearchFarm assesses the state of play in the market and profiles the key stakeholders from mobile device makers, Internet companies, retailers, social media and messaging businesses, card providers and banks. The report concludes that the development of mobile payments comes down to creating powerful network effects. If enough retailers and consumers adopt a platform, tech standard and service provider there is a possibility that mobile payments will break into the mass market. There is also the possibility that at least two or even three major systems arise.

After mobile network operators, various bank consortia or Google and PayPal failed to help mobile payments to a major breakthrough in recent years, it is now time for the device manufacturers Apple and Samsung to launch their services.

All eyes are on Apple, as the company has recruited millions of users to its ecosystem already and is backed by the credit card companies, with which it shares long established relationships, not just through iTunes. Apart from its existing data and insights on shoppers, Apple has a strong physical presence and is perhaps the gold standard when it comes to marketing (with Apple Pay as a reason to buy a new phone).

“The fact that Near-Field Communication has become the technology of choice for many mobile payments players, because Apple Pay uses it, despite arguably better technology available, demonstrates the influence the company has”, says Edward Bickel, co-author of the report.

A big strength that Apple Pay has moving forward is the soon-to-be integrated loyalty scheme within its payment app. Providing customers a chance to earn points and enjoy special promotions during the payment process is a compelling reason for shoppers to try out mobile payments. “One of the key barriers facing mobile payment players is to convince shoppers to swap their cash and cards for apps. Loyalty schemes will help in this process. Starbucks has been the pioneer of this strategy”, adds Bickel.

That said, whilst Apple Pay’s start in the US has been promising, cracking the EU will be a lot more difficult.

One area of weakness for Apple is the limited accessibility of Apple Pay. For consumers, the service is only supported on the latest iPhone and iPad models and for retailers, those with older point of sale terminals will either have to make the costly upgrade or turn down Apple Pay.

Another obstacle is that the business model as proposed by Apple will not be profitable for banks in Europe, if Apple uses the same conditions and cost structures in the EU as they do in the US. Part of the reason is the European Commission, which has just capped fees for cashless transactions. This will mean that banks will only be able to charge 0.3% per credit card transaction, for debit card the percentage falls to 0.2%. In the USA Apple charges the card issuing banks 0,15% of sales per transaction. If the same conditions applied in the EU then the European banks would have to give away half of their turnover to Apple, which means it would be difficult for banks to participate in Apple Pay and also make a profit.

Thirdly, credit cards, the core of the Apple Pay offering have a much lower penetration in the EU than in the US.

Despite this, Bickel concludes that: “Considering that phones and tablets that are powered by Android outnumber iOS devices by around four to one, it is not a given that Apple will come to dominate mobile payments like it has in other industries. Having said that, with a loyalty scheme, an enviable list of participating retailers and banks and its legion of followers, it would be hard to look beyond Apple”.

Unlike in the US, where new start ups such as meal solution providers, takeaway delivery services and online farmers markets such as Plated, Grub Hub and Good Eggs or the delivery start ups Instacart and Postmates are challenging the status quo, in the EU, where online grocery is much more developed, the multichannel retailers have another thing to fear altogether: the discounter surge.

And unlike in the past, the discounters have started to offer a full grocery shop, including chilled and frozen products, not just the wine or non food options of yesterday – but a proper basket at discounter prices no less.

From the likes of Colruyt in Belgium, Mercadona in Spain to Leaderprice and Dia in France to Lidl in Germany and Spain and even Aldi now considering entering the space, the discounters’ entry into the sector will change the economics of online grocery beyond all recognition once again – through brutal price deflation for a start.

Discounters who turn online grocery into a success pose another layer of problems for supermarkets altogether.

“If Lidl and Aldi with their reach decide to roll out a full online offer, then supermarkets will be attacked from all sides. Their entry into the sector through click & collect or home delivery would be catastrophic for the supermarkets,” says Edward Bickel, co-author of the report.

]]>0Adminhttp://www.researchfarm.co.uk/?p=20652015-05-21T07:35:08Z2015-05-21T07:32:03ZCasino’s and Ahold’s acquisition of non-food online marketplaces Cdiscount and BOL.com respectively will in years to come be recognized as watershed moments for EU online grocery.

Partnering up with an online e-commerce player with a strong non food offer and fast growing 3P marketplace opens up a myriad of possibilities for driving growth through cross selling, refreshing the in-store experience, widening the range and increasing synergies on the backend (far beyond click & collect).

Though the window of opportunity is closing fast, grocers have the once in a lifetime chance now to develop a business model that harnesses the best of both worlds. Whilst offline they can make the advantages of a specialist grocery business and physical footprint count (fresh produce, convenience products etc), online offers new possibilities.

These include outsourcing slower turning non food ranges to online and selling products in almost all retail categories to their shoppers through a third party marketplace.

If you want to learn more, keep reading and discover the key questions in our report brochure (contains a detailed table of content) and check back for the second part next week

The question now is what multichannel grocers should do to react to the rise of online farmers markets. Shoppers cannot get a full range of grocery products from the online famers markets, so some kind of cooperation with a multichannel grocer would make sense. A partnership approach could offer a comprehensive, integrated solution to satisfy shoppers’ needs.

There are a number of reasons why teaming up with or operating an online farmers market could be attractive to a multichannel grocer:

tapping into strong growth

offering unique product

depending on the set up, being able to charge fulfillment fees

attracting new customers

subsidising own shipping costs by bundling trips with 3P

positioning as “local farmers champion”

combine own needs in terms of store replenishment with needs of 3P sellers, organise the logistics efficiently

widen range, draw more footfall, drive sales

include 3P offers in delivery pass offers, make it more attractive for shoppers

achieve near perfect OSA, if product is not stocked by 1P then it is probably available through 3P

gain insights into bestsellers outside the traditional range

slow sellers could be “outsourced” to 3P

Small scale indies/local players want professional online infrastructure, customer reach and crucially fulfilment – a successful multi channel grocer has got all of this already. In order to carry out a short strategic analysis of the key success factors that an prospective food operator would need to have to deliver a successful and profitable food marketplace (either Local or National) we have raised a couple of questions (find out more here).

If you want to learn more, keep reading and discover the key questions in our report brochure (contains a detailed table of content) and check back for the second part next week

If you want to learn more, keep reading and discover the key questions in our report brochure (contains a detailed table of content) and check back for the second part next week

Part one in a series on online grocery retailing in selected geographies. Stay tuned for the second part focusing on Europe and a third on Latin America later in the year.

There are a number of reasons why the US online grocery sector has yet to take off (especially when benchmarked against the evolution across the Pond). However things are about to change and not just due to the continued roll out of AmazonFresh.

Right now, the confluence of grocery and online is producing a variety of innovative start up models that capture customers’ attention and spend. A growing number of takeaway delivery, meal solution and local and organic online farmers marketplace providers are disrupting the entire industry. This burst of innovation and business creation is starting to challenge the existing status quo.

Our Analyst team has set out to answer the question whether these new business models are taking over from multichannel grocers and pureplays and what they can do to address the rise of these new business models.

One key conclusion stresses the importance for online food operators to establish their own logistics and fulfilment platforms. The authors give clear reasons why the crowd-sourced model that Instacart and Postmates adopt is not a long term solution.

As it stands, AmazonFresh, a player that leverages its own fulfillment footprint, is stamping its authority on the sector with Walmart and Target playing catch up. According to one school of thought it is already too late and Walmart and Target will never close the gap on Amazon. US online grocery will then be the latest sector dominated by Jeff Bezos.

Yet another strand of thinking highlights two trends at play in US online grocery. On the one hand the major, nationwide retailers are investing into their online capabilities despite Amazon’s headstart, but on the other there is also an explosion of localised, niche start-ups making their presence felt.

Interesting times lie ahead across the Atlantic.

If you want to learn more, keep reading and discover the key questions in our report brochure (contains a detailed table of content) and check back for the second part next week

]]>0Adminhttp://www.researchfarm.co.uk/?p=20542015-03-24T07:46:45Z2015-03-24T07:46:45ZAccording to Germany’s trade magazine Lebensmittel Zeitung Aldi is preparing the launch of an online grocery offer in the UK. The paper reports that the discounter is starting a larger trial to become multichannel in Europe for the first time.

The UK market is ideal for a trial. UK shoppers are extremely online savvy and online grocery has reached a level in the UK that is miles ahead of the German grocery sector.

Germany’s biggest discounter has studied the online channel and online grocery business models for over ten years, but management always decided against a launch, fearing that an online offer would cannibalise in store sales.

That said, over the last two years the focus has shifted back to online and the discounter has hired experienced online professionals to prepare for the launch.

Daniel Lucht, Research Director at ResearchFarm comments:

“For now this is only a trial, however should Aldi decide to really venture into online grocery retailing in future, perhaps with a dedicated click & collect offer, then this would have the potential to change the dynamics of the entire industry.”

“Once both Aldi and Lidl add the online channel to their overall proposition and tap into latent demand, all bets are off in terms of where their market share could go.”

“There are still many UK areas underserved by Aldi and Lidl, and many shoppers without easy access to a hard discounter. Without knowing the specifics of the trial, which geographic areas the discounter would target and fulfillment options Aldi would offer, this remains speculation, but it looks like shopper reach could be widened significantly through a home delivery option.”

It should be noted that Aldi has been operating an online wine shop in Australia for over two years.

Faced with the rapid rise of Aldi and Lidl in their markets other grocers often respond by launching their own discounter. Surely it is better to self cannibalise than to just sit on the sidelines?

Whilst the logic behind such a move seems at first obvious, in real life this produces mixed results, that are about as conducive to halting Aldi and Lidl as a general price war.

In France Dia, recently spun out of Carrefour, struggled to such an extent that it needed to be rescued by its former owner. Casino’s Leaderprice and Franprix have reported lfls worse than -5% for the last three quarters in a row and Intermarche’s Netto or Auchan’s Prixbas have also failed to set the world alight.

Meanwhile in Germany Tengelmann gave up on its Plus discounter chain many years ago and sold it. Similarly, Rewe, Germany’s second biggest grocer, seems to constantly relaunch its Penny fascia, but there is perhaps one exception to the rule, with Edeka having some success with its Netto chain. (The discounter operates on a very different and much weaker sales and margin structure than an Aldi and Lidl though, it should be noted).

On the other hand stand alone discounter businesses such as Mercadona, Colruyt and Bierdronka are performing well.

So why is this? And why are we sceptical about Sainsbury’s tie up with
Netto in the UK?

Our analyst team, the leading authority on discount retailing in the EU has trawled through years of data and historic records going back more than a decade to unearth grocers’ initiatives in other markets. Then we assessed their success in halting the advances of Aldi and Lidl.

We have identified 7 major strategies:

3 strategies – though often tried – have failed to deliver every single time,
3 strategies are working
1 strategy on which the jury is still out.

The most often sought out and launched strategic response, often in haste, to the rise of the discounters is to attack them at their strongest point, their USP and core value and business principle, their price position. That said, we don’t know of a single example where this has actually worked to stop Aldi and Lidl. If one looks at their growth figures one usually sees rapid year on year growth – despite x amounts of price wars.

What’s more, the same can be observed in the UK right now. Aldi and Lidl are growing at breakneck speed at the same time as the big four have seen their lfls and bottom lines declining and right through their price war. For the first time in years UK grocers had to deal with real margin compression in 2014.

Shrinking margins show that investment in price is real and still this does not seem to work – why?

Our analyst team, the leading authority on discount retailing in the EU has trawled through years of data and historic records going back more than a decade to unearth grocers’ initiatives in other markets. Then we assessed their success in halting the advances of Aldi and Lidl.

We have identified 7 major strategies:

3 strategies – though often tried – have failed to deliver every single time,
3 strategies are working
1 strategy on which the jury is still out.

If you want to learn more, keep reading and discover the 25 key questions in our Lidl and Kaufland 2015 report brochure (contains a detailed table of content) and check back for the second part next week

Lidl changes tactics by debuting at the Paris Agricultural Show…

The attendees at the 2015 Agricultural Show held at the Porte de Versailles metro station in Paris witnessed an unexpected newcomer to the event in the shape of German discounter Lidl. The retailer took over the event with a 250 sq m product display stand inspired by a farmers’ market in a typical French village, an army of employees dishing out free sample gift bags and offering shoppers one year free shopping, and the metro station’s walls and stairs adorned with Lidl logo stickers.

Lidl’s presence in an unfamiliar setting exemplifies the discounter’s keenness to refine its image among French shoppers and clearly demonstrate the quality of its products at rock bottom prices that have drawn shoppers in elsewhere in Europe. In addition, Lidl wants to move away from its discounter label and rival Aldi and emanate towards competing with the French supermarkets. Lidl promoted the fact that it works with 600 French producers and has a presence in Rungis, the main food market in France, to prove its commitment to source locally and cater to French tastes in an attempt to rival the offerings of the domestic supermarkets.

We believe that Lidl’s new found flexibility in sourcing will reap huge dividends, as French cuisine, products and quality standards resonate so well with French shoppers.

…and expects sales in Germany to top €18.0bn

Meanwhile in Germany Lidl will relaunch its private label proposition including the coffee private label brand Bellarom or the dairy private label Milbona. Lidl aims to position its own brands as rivals on an equal footing to the likes of Dallmayr or Danone. The retailer will also carry out a range portfolio optimisation exercise to reduce the number of own brands to subsume them under various umbrella ranges and to improve further on quality credentials. All this will be supported by TV ad campaigns and an online push over the next couple of weeks.

In another development the company revealed that every week around 7,500 shoppers buy groceries in each of Lidl’s 3300 stores in Germany and that the retailer expects sales to smash through the €18.0bn barrier in Germany in 2014/15 for the first time.

If you want to learn more, keep reading and discover the 25 key questions in our Lidl and Kaufland 2015 report brochure (contains a detailed table of content) and check back for the second part next week

If you want to learn more, keep reading and discover the 25 key questions in our Aldi 2015 report brochure (contains a detailed table of content) and check back for the second part next week

Aldi has achieved a 4.9% UK market share in 2014 with a very tight range of SKUs. This means that Aldi’s share within the categories the discounter actually retails in is already much higher than 5% and its impact felt much wider. We believe that going forward Aldi’s rapid growth will move it beyond both Waitrose and the Coop in the UK in market share and as a result the discounter will start to set the price floor in UK grocery more and more.

By doing so the discounter becomes an attractive retailer for the FMCG industry, and the major players (not just Coke) will try to list with Aldi, and not just in the UK but globally. After all on a SKU basis Aldi is still the biggest buyer on a global level ahead of WalMart.

In the UK Aldi’s rapid market share gains also mean that the discounter reaches shoppers the big four may not necessarily be able to. This is in turn makes the retailer so attractive to FMCG A brands, as listing in Aldi guarantees that they can widen their reach, drive penetration and sales.

For Aldi the attraction to gently evolve its strict private label and EDLP only strategy to actually listing brands lies in gaining new customers, especially younger families, in gaining a halo effect from the brands and moving its image more upmarket and of course in building basket size.

That said, there is a clear limit as to how far Aldi will go with listing FMCG A brands. Among these are firstly space restrictions, Aldi’s compact store footprint translates into stocking at most only one of the leading brands besides its private label proposition. Secondly, Aldi is of course loath to cannibalise its hugely successful private label range, so brands are only listed in categories where they promise a real sales uplift and contribution, in other words in categories where brands are simply too strong, such as baby care or some confectionery. Third, there are control issues from the logistics at the back end to on shelf presentation, with Aldi usually controlling all operational aspects entirely by itself – and fourth crucially Aldi enables price comparison by listing brands. Taken together with a number of other reasons, this means that FMCG A brands incorporated into the standard range in Aldi will remain more of an anomaly and Aldi will not even soften its image to the same degree as Lidl.

The interesting question though is what happens when an FMCG A brand does list with Aldi. Judging from experience elsewhere in the EU, other retailers will try to undercut Aldi on exactly this brand in weekly promotions to ruin Aldi’s price leadership image and they will ask for concessions from the FMCG producer for doing so. Some retailers will also respond by delisting the brand from their stores – so some sales volumes will be lost to the brand.

In time Aldi will have to respond to defend its core business principle, price leadership, and lower its pricing for the brand too, so price deflation sets in across the entire sector. This means brands need to calculate on a line by line basis whether listing with Aldi is actually worth it. The sales uplifts both in value and volume and new customer reach are clearly huge, but the wider effects should be taken into account.

While many FMCG producers will see the Aldi opportunity as simply beyond them, there is also the impact to be reckoned with when the key competitor achieves that elusive Aldi listing. In Germany for example one result of the Coke listing was price deflation for Pepsi, as the brand was dragged into the price war and retailers started to promote Pepsi to go head to head with Coke promotions run by the competition.

While there is a real opportunity for FMCG A brands to list within Aldi UK, we would sound a word of warning. At the end of the day listing with Aldi will only work for the very strongest brands that can manage the backlash from other retailers and the promotional storm and price cutting that will be unleashed on the sector. On the other hand at least one other concern about listing in a discounter has become outdated, that of brands cheapening their image by being associated with Aldi or for that matter Lidl. 30% y-o-y growth has seen to that.

If you want to learn more, keep reading and discover the 25 key questions in our Aldi 2015 report brochure (contains a detailed table of content) and check back for the second part next week